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Why Analysts Say Google Parent Alphabet is Still a Great Buy

Last Updated September 23, 2020 12:17 PM
Melanie Kramer
Last Updated September 23, 2020 12:17 PM

Despite lack of confidence in FAANG stocks for 2019, several analysts including Cannacord and Pivotal Research have upgraded Alphabet shares from hold to buy. The expectation is that the share price of Google’s parent company will continue to profit from growth in the digital advertising industry.

Google to Benefit from Increased Digital Ad Revenue

Society is becoming more aware of the influence of the likes of Google and Facebook on internet habits. Both companies are receiving increasing criticism over just how much of our data is recorded as passed to advertisers. Yet the global digital advertising market was worth $250 billion in 2018, and it could grow further.

Investment research firm Canaccord predicts  that even more advertising spend will move from print, radio, and TV to the internet. This spending will convert to profit for Google and Facebook, leading Canaccord to now revise its Alphabet stock expectation upwards.

U.S Companies spend $350 billion annually on marketing. “We see large amounts of this spend moving online, with AMZN and GOOGL as the prime beneficiaries,” Canaccord said.

Google Parent Alphabet Won’t be Harmed by New Regulations

Alphabet (GOOGL) Share Price in the Last Month Source: Trading View

The analysts believe even if Google sees further regulation after privacy and data concerns, its size means it will easily absorb that impact.

Canaccord expects Alphabet’s revenue to grow by 15% to 20% in the next few years. This will lead to 15% earnings per share (EPS) growth between 2020 and 2022.

Pivotal Research has also upgraded Alphabet stock to a “buy” rating. Pivotal believes Alphabet’s share price will hit $1,240, rising from its current price of $1,064.

Many analysts gave Alphabet a share price goal of anywhere between $1,250 and $1,415 when forecasting during September and October last year, though market conditions have changed greatly since then.

Alongside Canaccord and Pivotal, Monness Crespi & Hard also set a buy rating for Alphabet last Friday.

Reports  indicate that a total of thirty analysts rate the Google parent’s stock with a “buy” rating. A further three give Alphabet shares a “hold” rating. The average is a resounding “buy” for Alphabet and Google with an average target share price of $1,342.11.

For Q3 2018 Google achieved revenue of $27.16 billion against analyst’s forecasts of $27.32 billion. A number of major investors increased their positions in Google at the end of 2018 including Capital Insight Partners LLC and GFS Advisors LLC.

FAANG Stocks for the Last Month (Alphabet: Blue, Facebook: Red, Apple: Orange, Amazon: Yellow, Netflix: Green) Source: Trading View

Of FAANG stocks, Apple might not be so fortunate this year, and it has already revised its revenue forecast downwards. The result was a major Apple share price drop and stock market dip. That said, one analyst bucked the Apple trend, recently saying it is not time to sell Apple shares.

Featured Image from Shutterstock. Price Charts from TradingView .